Around the markets – views of the managers

By Unconventional Wisdom on 09/April/2020

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Rather than update on the many earnings
downgrades, removal of forecasts or ballooning unemployment figures around the
world, we thought it worth summarising the views of some of the more
experienced asset managers from around the world.

Morningstar Research: Overall, we see a
weighted average hit of 1.5 per cent to 2020 global GDP and 0.2 per cent to
long-run global GDP. We forecast a muted long-term impact because damage to
productive capacity will be small, plus economic confidence should quickly
return once the virus subsides.

Coupled with a huge increase in global fiscal
stimulus, this new monetary policy stimulus to combat the adverse effects of
the coronavirus will ultimately help the global economy transition through two
very negative quarters of GDP growth to what will almost certainly be a
vigorous recovery. In fact, we expect the bounce to be among the strongest
recorded given the impact of the virus is, when all is said and done, a
temporary dislocation that will leave enormous amounts of residual policy
stimulus that could ultimately result in a speculative melt-up.

Aswath Damodaran’s Blog – Musings on the Market: In periods of pricing tumult, like the last three weeks, it is
both futile and perhaps counterproductive to try to explain big pricing moves,
especially on a day-to-day basis, with the language and tools of value. If I
could make a suggestion to the financial news channels now, here is what it
would be. Remove all the talking heads (including me) from the screen, and
just show the stock indices in real time. This is a market that needs no
commentary!

Pendal Investment Management: The influence of ETFs and passive
investing is clearly apparent in the indiscriminate nature of the market
sell-off. This has been exacerbated by the effect of risk parity strategies and
other systematic approaches needing to de-risk. The market’s sell-off is
rational, but indiscriminate selling has led to outcomes which are irrational —
such as the poor performance of traditional hedges such as gold.

ARK Invest:
Catherine Wood of ARK Invest suggesting that news and social media is
exacerbating what is likely to be a V shaped recovery, with fears and hoarding
more viral than COVID 19 itself. Interestingly, she noted that COVID 19 was
gene sequenced in just 2 days due to incredible advancements in technology,
compared to 5 months for SARS; with a vaccine likely to come faster than
expected as well. Looking at the economy before this event, consumers were
confident, businesses were not, which should help in an eventual turnaround.
She did note the everything will fall but governments are united in their
response and resolve, which increases the likelihood of a quick recovery.

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